A lot of hot air and still no solution to greenhouse

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Australians are the world's biggest producers of greenhouse
gases, assisted by hot air streaming from the green lobby and the
Federal Government in Canberra.

Instead of treating climate change as an economic problem about
who should pay what price to mitigate the highly uncertain costs,
both sides have categorised the issue as one of absolutes.

A scientific consensus is forming that anthropogenic (man-made)
gases are making the world warmer.

World temperatures increased 1 degree last century and are
projected to rise between 1.4 degrees and 5.8 degrees by 2100,
depending largely on assumptions about abatement policy,
technological change and economic growth.

The 1990s gave us the hottest decade of the century and possibly
the millennium, according to the Pew Centre for Global Climate
Change, which has been enlisted by the Government as an honest
broker in this debate. Three of the past six years are among the
hottest ever recorded.

A report last month by the Pew Centre to the world climate
dialogue in Buenos Aires crowned Australians as the highest
emitters, per capita, in the world, except for a handful of Gulf
oil producers.

Each of us burns the equivalent of 6.8 tonnes of carbon embedded
in fossil fuels thanks to a blend of high incomes, high energy
intensity in producing that income and an unusually high reliance
on carbon in our fuel mix.

That's more than the Americans, twice as much as the Britons and
six times as much as the Chinese.

This much is accepted by greens and the Government alike.

For many environmentalists, global warming is an absolute evil
and its mitigation is worth any cost.

This is one reason why the birth of the Kyoto Protocol has been
so traumatic and its life is likely to be short.

If its arbitrary targets work at all, they will impose crippling
costs on a handful of countries such as Japan, Canada and Russia,
while the big emitters of the world avoid any cost at all.

Greens leader Bob Brown would take further measures that would
impose excessive costs to achieve a given quantity of greenhouse
abatement, like banning coal while ignoring petrol.

The climate change policy inherited from the Department of
Industry by the Minister for the Environment, Ian Campbell, has an
equal and opposite problem.

At least at face value, the policy treats climate change as a
problem that is not worth paying any cost to solve.

The Government has asked nicely for industry to reduce emissions
and refrained from imposing any financial disincentive for not
doing so.

"The last thing we need in the industrial world is more taxes on
production," Campbell told the Herald last month.

You don't need to be an econometrician to calculate that
Australian power providers will not go out of their way to clean
their coal, and commuters will not readily reduce the mileage on
their cars, without personal incentives for doing so.

Campbell is a thoughtful man with considerable experience with
financial markets. He recently floated the idea of a market to
trade in pollution rights.

Yesterday he acknowledged to the Herald that it would be
difficult to change behaviour without placing a price tag on
pollution - and impossible to create a market for pollution rights
without first restricting pollution to create scarcity and
therefore value. "It may be necessary to create price signals," he
conceded.

So the current policy is unsustainable and will ultimately be
replaced by some form of emissions tax?

Well, no. The Government is apparently into positive price
signals, rather than negative ones.

"The difference between us and the Labor states is we are
funding an incentive rather than imposing a tax," he said.

Campbell said the Government had already pledged $1.8 billion on
research, development and commercialisation grants and was prepared
to spend more.

Instead of price signals that apply to everyone, there are
subsidies for some companies, hand-picked, project by project, by
bureaucrats.

All the Government is doing is imposing a tax - on taxpayers
generally, regardless of their part in the greenhouse problem.

To link the Government's policies with Campbell's market
aspirations, you would have to believe that centrally planned
handouts will evolve into an efficient, tradeable market in
government subsidy rights.

The extremist policies of both the Government and the Greens
have a lot in common.

Greens are pushing for absolute limits on specific polluting
sectors or countries, imposing unbounded economic costs in those
areas. The Government has fixed an absolute financial cost on the
taxpaying public but accepted unbounded environmental costs.

A solution that lies between the two extremes would impose a
cost evenly across greenhouse gas emitters and endow existing users
with compensating, tradeable, permits.